We recently sat down with Paradise Yacht Management's Co-Founders, Hank Hampton & Steve Schlosser, to go over a detailed Q&A session about charter yacht management. The topics are some of the most frequently asked questions and some that may never cross the minds of industry newcomers.
We recently sat down with Paradise Yacht Management's Co-Founders, Hank Hampton & Steve Schlosser, to go over a detailed Q&A session about charter yacht management. The topics are some of the most frequently asked questions and some that may never cross the minds of industry newcomers.
Where the Industry is Headed
Where the Industry is Headed
Q: How have you seen the industry change since COVID and how is your outlook moving forward with PYM and the charter industry as a whole?
HH: As soon as the quarantines were lifted In the U.S. Virgin Islands the charter industry down here just exploded. This was mainly due to the closure of neighboring countries, such as the B.V.I., St. Maarten, etc. that were not accepting foreigners. Even after they opened up, the B.V.I. still had and has restrictions making the U.S.V.I. an ideal charter destination. That really has propelled us through the pandemic to not just get back to business as usual, but to flourish. The future is bright for us, for sure.
SS: Yea, we really have seen an unprecedented concentration of newcomers to the U.S.V.I. The global market for charter is actually growing. It was estimated 6.6 billion and it's projected to reach 9.3 billion by 2027 in revenues. So, there's still a lot of space in the crewed charter market for growth. You know, it's just, it's one of the sectors of the market that COVID has driven through the roof.
HH: The crewed charter business is really expanding at a dramatic rate. You know, three years ago, crewed yacht was a pretty good business to be in but with the event of COVID, what's happened is that you know cruise ships have fallen out of the picture. Bareboat charters are a major problem because, you know, obviously the time it takes to go, check in, do your inventory and your technical briefing, your chart briefing, your systems, etc. You wasted probably a large part of the first day. Same on the return. So, what happened is suddenly people started realizing that crewed charter is the way to go. The crewed boat is equipped, it's provisioned, it's got a crew. You arrive there, you put your bag down, you get a cocktail, untie the lines and you're out of there and when you arrive, it's quick and easy both ways.
Q: How have you seen the industry change since COVID and how is your outlook moving forward with PYM and the charter industry as a whole?
HH: As soon as the quarantines were lifted In the U.S. Virgin Islands the charter industry down here just exploded. This was mainly due to the closure of neighboring countries, such as the B.V.I., St. Maarten, etc. that were not accepting foreigners. Even after they opened up, the B.V.I. still had and has restrictions making the U.S.V.I. an ideal charter destination. That really has propelled us through the pandemic to not just get back to business as usual, but to flourish. The future is bright for us, for sure.
SS: Yea, we really have seen an unprecedented concentration of newcomers to the U.S.V.I. The global market for charter is actually growing. It was estimated 6.6 billion and it's projected to reach 9.3 billion by 2027 in revenues. So, there's still a lot of space in the crewed charter market for growth. You know, it's just, it's one of the sectors of the market that COVID has driven through the roof.
HH: The crewed charter business is really expanding at a dramatic rate. You know, three years ago, crewed yacht was a pretty good business to be in but with the event of COVID, what's happened is that you know cruise ships have fallen out of the picture. Bareboat charters are a major problem because, you know, obviously the time it takes to go, check in, do your inventory and your technical briefing, your chart briefing, your systems, etc. You wasted probably a large part of the first day. Same on the return. So, what happened is suddenly people started realizing that crewed charter is the way to go. The crewed boat is equipped, it's provisioned, it's got a crew. You arrive there, you put your bag down, you get a cocktail, untie the lines and you're out of there and when you arrive, it's quick and easy both ways.
Bareboat vs. a Management Program
Bareboat vs. a Management Program
Q: Has there been more of a demand for a bareboat or yacht management program recently?
HH: Without a question; yacht management. What's happened over the last year we found is that crewed charters have become more and more popular. The global market for crewed is definitely growing while the global market for bareboat is taken a bit of a hit. Not just with guests, but especially with yacht owners. The biggest factor is just the way bareboat renters treat the vessel. It has forced a lot of bareboat owners to contact us and get signed up with a yacht management program that has a professional crew taking care of the boat during the season.
SS: You can think of it like this. Imagine a rental car versus a taxi. Which of those cars would you rather be the owner of? Which one has the operator treating it more like it is their own with less risk of damage? Owners are becoming more and more concerned about the condition of the boat, how the boats protected during it's service and what it's going to look like at the end of the charter season. We've seen charter boats look new 15 years after production with plenty of charters under the belt strictly due to the fact that a great crew has taken the care of the boat as their own. That is one of main aspects of this company we strive for.
Q: Has there been more of a demand for a bareboat or yacht management program recently?
HH: Without a question; yacht management. What's happened over the last year we found is that crewed charters have become more and more popular. The global market for crewed is definitely growing while the global market for bareboat is taken a bit of a hit. Not just with guests, but especially with yacht owners. The biggest factor is just the way bareboat renters treat the vessel. It has forced a lot of bareboat owners to contact us and get signed up with a yacht management program that has a professional crew taking care of the boat during the season.
SS: You can think of it like this. Imagine a rental car versus a taxi. Which of those cars would you rather be the owner of? Which one has the operator treating it more like it is their own with less risk of damage? Owners are becoming more and more concerned about the condition of the boat, how the boats protected during it's service and what it's going to look like at the end of the charter season. We've seen charter boats look new 15 years after production with plenty of charters under the belt strictly due to the fact that a great crew has taken the care of the boat as their own. That is one of main aspects of this company we strive for.
Bareboat vs. a Management Program
Bareboat vs. a Management Program
Q: If a potential owner asks "Due to your experience in the industry, what would you say the perfect boat is that I should get?"
HH: That's a really good question. Honestly, it depends on the budget and lifestyle. Keep in mind pre-owned vessels may be cheaper, but may need more maintenance. New boats from the factory will be more expensive, but will come with a warranty. We would say a sweet spot would be, without naming brand names, a 50'-58" 8-pack sailing catamaran. They can run anywhere from $800K to $2.5M. for purchase. We are happy to go over in detail our pro-forma's on which makes the most sense for the owner. With that said, we've seen a lot of success with a 6-packs and 10-packs. It really comes down to the right crew paired with the right boat. That's the secret to all of this.
SS: We can't stress enough how important it is to hire and keep the right crew. That is one of the major benefits of signing up with a well-known management company. We simply attract the best, veteran crews. But it's important to note that the owner needs to treat the crew well to keep them. We teach our owners exactly how to do that, like giving the crew a queen size cabin as opposed to a fore peak, pay incentives, time-off to reset, and so on. It's the only way we can ensure the first guest of the season has the same experience as the last guest of the season.
Q: If a potential owner asks "Due to your experience in the industry, what would you say the perfect boat is that I should get?"
HH: That's a really good question. Honestly, it depends on the budget and lifestyle. Keep in mind pre-owned vessels may be cheaper, but may need more maintenance. New boats from the factory will be more expensive, but will come with a warranty. We would say a sweet spot would be, without naming brand names, a 50'-58" 8-pack sailing catamaran. They can run anywhere from $800K to $2.5M. for purchase. We are happy to go over in detail our pro-forma's on which makes the most sense for the owner. With that said, we've seen a lot of success with a 6-packs and 10-packs. It really comes down to the right crew paired with the right boat. That's the secret to all of this.
SS: We can't stress enough how important it is to hire and keep the right crew. That is one of the major benefits of signing up with a well-known management company. We simply attract the best, veteran crews. But it's important to note that the owner needs to treat the crew well to keep them. We teach our owners exactly how to do that, like giving the crew a queen size cabin as opposed to a fore peak, pay incentives, time-off to reset, and so on. It's the only way we can ensure the first guest of the season has the same experience as the last guest of the season.
Purchasing a Yacht
Purchasing a Yacht
Q: If a yacht owner is new to the industry, how important is it to purchase a yacht through a broker and then get signed up with a management company as opposed trying to piece everything together by themselves?
HH: It is extremely important to have professionals lead the way through charter yacht ownership, especially from the beginning. We have seen first hand numerous new owners try to source the best deal on purchasing, navigate contacts, then try to hire the best crew for that boat, get bookings, do their own maintenance and fail. Eventually, they contact us and we get everything back on track for them. Majority of the time though, they contact us first and we avoid all those issues for them.
Q: If a yacht owner is new to the industry, how important is it to purchase a yacht through a broker and then get signed up with a management company as opposed trying to piece everything together by themselves?
HH: It is extremely important to have professionals lead the way through charter yacht ownership, especially from the beginning. We have seen first hand numerous new owners try to source the best deal on purchasing, navigate contacts, then try to hire the best crew for that boat, get bookings, do their own maintenance and fail. Eventually, they contact us and we get everything back on track for them. Majority of the time though, they contact us first and we avoid all those issues for them.
What a Clearing House Does
What a Clearing House Does
Q: So why is a Clearing House important and what services do they provide?
SS: Generally, all crewed boats have their boat registered in a clearing house and the clearing house manages the boat’s calendar and charter finances. With majority of the bookings coming through the broker network, it's necessary for a third party to manage these aspects. So, the broker network will go and book the boat but they will see if your boat is available by going to the clearing house and then the clearing house will make sure that this booking is processed and for that they can charge anything from one to three percent. We've opened our own clearing house, Paradise Yacht Clearing, to create a more efficient booking process.
Q: So why is a Clearing House important and what services do they provide?
SS: Generally, all crewed boats have their boat registered in a clearing house and the clearing house manages the boat’s calendar and charter finances. With majority of the bookings coming through the broker network, it's necessary for a third party to manage these aspects. So, the broker network will go and book the boat but they will see if your boat is available by going to the clearing house and then the clearing house will make sure that this booking is processed and for that they can charge anything from one to three percent. We've opened our own clearing house, Paradise Yacht Clearing, to create a more efficient booking process.
How To Choose Amenities & Toys
How To Choose Amenities & Toys
Q: Once an owner purchases a yacht, what are the basic amenities or toys they should outfit it with?
SS: Before we talk about the toys, you need to have a water maker, a large ice maker, a generator, a Dometic fridge for extra food storage, multiple coolers, and also the largest tender that can be used for that boat. All of these things have been crucial to guest experiences and have been a game changer. Dishwashers and washing machines are optional and are not too popular. The space could be used better instead of having those. Flat screen T.V.s are popular but what we've seen is that they rarely get used. There's somethings that look really good on a brochure but aren't too practical. That's one of them. For toys, the basics would be snorkel sets for all guests, at least 2 inflatable paddle boards, an inflatable 2-person kayak, a large floating mat or 2, a wake board or knee board, and onshore games. Other toys that some charter boats have are water skis, subwing and a foil board. It's important to have a charter boat full of amenities and toys, we've seen it be a deal breaker time and time again.
Q: Once an owner purchases a yacht, what are the basic amenities or toys they should outfit it with?
SS: Before we talk about the toys, you need to have a water maker, a large ice maker, a generator, a Dometic fridge for extra food storage, multiple coolers, and also the largest tender that can be used for that boat. All of these things have been crucial to guest experiences and have been a game changer. Dishwashers and washing machines are optional and are not too popular. The space could be used better instead of having those. Flat screen T.V.s are popular but what we've seen is that they rarely get used. There's somethings that look really good on a brochure but aren't too practical. That's one of them. For toys, the basics would be snorkel sets for all guests, at least 2 inflatable paddle boards, an inflatable 2-person kayak, a large floating mat or 2, a wake board or knee board, and onshore games. Other toys that some charter boats have are water skis, subwing and a foil board. It's important to have a charter boat full of amenities and toys, we've seen it be a deal breaker time and time again.
Crew Placement
Crew Placement
Q: So let's talk about crew, what do you guys look for in a charter captain?
HH: For a captain, you got to obviously look for someone that's well qualified with experience. I think it's pretty important that the captain has a track record because of the broker network. If brokers like the crew, they will support the crew. If they trust that the crew’s going to produce a good job, they'll feel more comfortable booking that boat over another. So well-experienced, well-qualified, with a calm nature, and of course they have to be good with people is essential and basic to run charters. In addition to that, crew have to understand that they need to take care of the boat as their own. Especially when it comes to everyday maintenance and making sure they pay attention to detail and take exceptional care of it on and off charter. Generally, a good captain will know how to do service engines, change filters, clean filters, etc. Major maintenance, obviously you need to farm out to the local, you know, the local technical services. We have great connections in the Virgin Islands for those services.
SS: We also pair the perfect crew with the right owner in addition to the boat. You know, they're managing a major purchase and we want to make sure you feel you have a crew you can trust onboard. Trust is an extremely important factor.
Q: So let's talk about crew, what do you guys look for in a charter captain?
HH: For a captain, you got to obviously look for someone that's well qualified with experience. I think it's pretty important that the captain has a track record because of the broker network. If brokers like the crew, they will support the crew. If they trust that the crew’s going to produce a good job, they'll feel more comfortable booking that boat over another. So well-experienced, well-qualified, with a calm nature, and of course they have to be good with people is essential and basic to run charters. In addition to that, crew have to understand that they need to take care of the boat as their own. Especially when it comes to everyday maintenance and making sure they pay attention to detail and take exceptional care of it on and off charter. Generally, a good captain will know how to do service engines, change filters, clean filters, etc. Major maintenance, obviously you need to farm out to the local, you know, the local technical services. We have great connections in the Virgin Islands for those services.
SS: We also pair the perfect crew with the right owner in addition to the boat. You know, they're managing a major purchase and we want to make sure you feel you have a crew you can trust onboard. Trust is an extremely important factor.
Cabin Layouts
Cabin Layouts
Q: Do new owners ask about where the crew should sleep and how to make that decision?
SS: Yes, we get asked that question a lot. Basically crew take a cabin. So if it's a 4 queen cabin boat crew get one of those cabins making it a 6-pack 3 cabin boat for guests. But If the boat as a bunk cabin, the crew may be okay with that as well. Putting crew up in the forepeaks is not going to attract a crew that’s very happy and could have a lot of turnover and issues. So, it's very important to be sure that in the layout of your boat, you have a realistic crew quarters because a happy crew results in a good charter and happy guests.
HH: Yeah, just think about it. Your crew literally works 24/7. For seven days straight or whatever the time of the charter. It is a very, very hard job. Steve and I have both done it. So, when crews go to their cabin, they don't want to go into a little, into a little nook, you know, and trying to get some rest. So, it's advisable to consider a “live able” cabin for your crew, but not the best cabin. The best should be reserved for the guests, of course.
Q: Do new owners ask about where the crew should sleep and how to make that decision?
SS: Yes, we get asked that question a lot. Basically crew take a cabin. So if it's a 4 queen cabin boat crew get one of those cabins making it a 6-pack 3 cabin boat for guests. But If the boat as a bunk cabin, the crew may be okay with that as well. Putting crew up in the forepeaks is not going to attract a crew that’s very happy and could have a lot of turnover and issues. So, it's very important to be sure that in the layout of your boat, you have a realistic crew quarters because a happy crew results in a good charter and happy guests.
HH: Yeah, just think about it. Your crew literally works 24/7. For seven days straight or whatever the time of the charter. It is a very, very hard job. Steve and I have both done it. So, when crews go to their cabin, they don't want to go into a little, into a little nook, you know, and trying to get some rest. So, it's advisable to consider a “live able” cabin for your crew, but not the best cabin. The best should be reserved for the guests, of course.
Owner Usage
Owner Usage
Q: So how does it work when the owners want to use their boat for personal use?
HH: Great question, we get that a lot. Before you sign up with us, we go over expectations and on how much you are interested in owner usage and show you the numbers to cater to their wants but also make sure it doesn't effect the charter season's income too much. The best month is May for owners usage. That is a month when charters naturally have a lull and when we actually have an annual event called Owners Week where we invite our yacht owners to come down to the islands and enjoy a week of events and leisure time to enjoy their boat. It's super fun! We really try to avoid having the owners come down during the Holidays or too frequently during busy months. At the end of the day, we're flexible and want our owners to enjoy yacht ownership as much as possible while having a bottom line that they are happy with.
SS: So, I would say the general standard for owners usage if you don’t intend to utilize the crew for your owners charter is you either put them up at a hotel or you would give them an allowance to fly home or to some other place that they perhaps want to go because a lot of these folks have friends and family in other locations. It's a good way to give them a break as well during the season.
Q: So how does it work when the owners want to use their boat for personal use?
HH: Great question, we get that a lot. Before you sign up with us, we go over expectations and on how much you are interested in owner usage and show you the numbers to cater to their wants but also make sure it doesn't effect the charter season's income too much. The best month is May for owners usage. That is a month when charters naturally have a lull and when we actually have an annual event called Owners Week where we invite our yacht owners to come down to the islands and enjoy a week of events and leisure time to enjoy their boat. It's super fun! We really try to avoid having the owners come down during the Holidays or too frequently during busy months. At the end of the day, we're flexible and want our owners to enjoy yacht ownership as much as possible while having a bottom line that they are happy with.
SS: So, I would say the general standard for owners usage if you don’t intend to utilize the crew for your owners charter is you either put them up at a hotel or you would give them an allowance to fly home or to some other place that they perhaps want to go because a lot of these folks have friends and family in other locations. It's a good way to give them a break as well during the season.
Insurance & Tax Benefits
Insurance & Tax Benefits
Q: When it comes to insurance and taxes, what are the benefits of going with a management company with a fleet of your size?
HH: As far as insurance goes, the major benefit is that it is becoming increasingly more difficult to find insurance in the Caribbean, especially for new owners. We have no problem getting insurance for your vessel with our provider of fleet insurance. In addition, we do get a break with premiums. For taxes, if you run your boat, as a lot of people are running the boat, as a corporation and taking advantage of certain and applicable tax breaks and doing accelerated depreciation and writing off costs. So, there's also an opportunity to offset the cost of ownership with some pretty substantial tax breaks. But there are a lot of hooks and a lot of issues that you should be aware of. You could make a decision and not be aware of something that materially affects your business plan in the tax rules. Consulting with a tax professional to discuss your personal current and future tax effects is the best practice.
SS: Also, if you're an owner-operator, you're using the tax advantages inside of your business because that's your sole source of income. If you're still working and you're in your high-income years, what a lot of people will do is they will establish a charter business with a professional crew on board and you're able to structure the business in such a way that you can use the depreciation and other tax benefits to offset taxes owed on income from other business trade or salary. Again, consulting with a tax professional for tax advantages/disadvantages that will best fit your goals is highly advised.
HH: There's so much to this topic. We go over the details about this and all the other aspects of yacht ownership during our consultation to see how our services can benefit new owners and get them up to speed before signing up with our management program.
Q: When it comes to insurance and taxes, what are the benefits of going with a management company with a fleet of your size?
HH: As far as insurance goes, the major benefit is that it is becoming increasingly more difficult to find insurance in the Caribbean, especially for new owners. We have no problem getting insurance for your vessel with our provider of fleet insurance. In addition, we do get a break with premiums. For taxes, if you run your boat, as a lot of people are running the boat, as a corporation and taking advantage of certain and applicable tax breaks and doing accelerated depreciation and writing off costs. So, there's also an opportunity to offset the cost of ownership with some pretty substantial tax breaks. But there are a lot of hooks and a lot of issues that you should be aware of. You could make a decision and not be aware of something that materially affects your business plan in the tax rules. Consulting with a tax professional to discuss your personal current and future tax effects is the best practice.
SS: Also, if you're an owner-operator, you're using the tax advantages inside of your business because that's your sole source of income. If you're still working and you're in your high-income years, what a lot of people will do is they will establish a charter business with a professional crew on board and you're able to structure the business in such a way that you can use the depreciation and other tax benefits to offset taxes owed on income from other business trade or salary. Again, consulting with a tax professional for tax advantages/disadvantages that will best fit your goals is highly advised.
HH: There's so much to this topic. We go over the details about this and all the other aspects of yacht ownership during our consultation to see how our services can benefit new owners and get them up to speed before signing up with our management program.
